No Limit: Medicare Part D Enrollees Exposed to High

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No Limit: Medicare Part D Enrollees Exposed to High Out- of-Pocket Drug Costs Without a Hard Cap on Spending Juliette Cubanski, Tricia Neuman, Kendal Orgera, and Anthony Damico Since 2006, the Medicare Part D prescription drug benefit has helped improve the affordability of medications for people with Medicare. Yet even with Part D, enrollees can face relatively high out-of-pocket costs because there is no hard cap on out-of-pocket spending under Part D. Enrollees are required to pay up to 5 percent of their drug costs above the catastrophic coverage threshold, unless they receive low-income subsidies that help pay Part D premiums and cost sharing. For high-priced medications, this relatively small coinsurance rate can translate into significant out-of-pocket costs. This analysis examines out-of-pocket prescription drug spending among Medicare Part D enrollees with costs above the catastrophic coverage threshold.

Figure 1  In 2015, 3.6 million Medicare Part D In 2015, 1 million Medicare Part D enrollees without low-income enrollees had total drug spending above subsidies had high out-of-pocket drug costs—above the catastrophic coverage threshold—more than twice the number in 2007 the catastrophic coverage threshold. Of this Number of Part D enrollees: 1,002,700 total, 2.6 million enrollees received low- 891,720 income subsidies, but 1 million enrollees did not, and incurred out-of-pocket drug 681,860 spending above the catastrophic threshold. 483,640 516,580  Between 2007 and 2015, the number of 424,260 407,240 397,680 380,380 Part D enrollees without low-income subsidies who had spending above the catastrophic threshold more than doubled (Figure 1). 2007 2008 2009 2010 2011 2012 2013 2014 2015  Part D enrollees with out-of-pocket costs NOTE: Analysis includes enrollees in stand-alone prescription drug plans and Medicare Advantage drug plans. Out-of-pocket costs include Part D drug costs, but not Part D premiums or costs for Part B-covered drugs. above the catastrophic threshold SOURCE: Kaiser Family Foundation analysis of a five percent sample of 2007-2015 Medicare prescription drug event claims from the CMS Chronic Conditions Data Warehouse. comprised just 2 percent of all enrollees but 20 percent ($3 billion) of enrollees’ total out-of-pocket drug spending ($15 billion) in 2015.  The one million Part D enrollees with out-of-pocket costs above the catastrophic threshold spent more than $3,000 out of pocket on their prescriptions in 2015, on average; 1 in 10 of them spent at least $5,200. In total, they spent $1.2 billion out of pocket above the catastrophic threshold, or $1,215 per person.  Harvoni and Sovaldi, treatments for hepatitis C, topped the list of the 10 most costly drugs used by Part D enrollees with high out-of-pocket drug costs in 2015.  Among Part D enrollees in stand-alone Medicare drug plans without low-income subsidies, those with HIV/AIDS, multiple sclerosis, viral hepatitis, leukemia/lymphoma, and schizophrenia were more likely than those with other conditions to have out-of-pocket spending above the catastrophic threshold in 2015.  Average out-of-pocket costs by Part D enrollees with spending above the catastrophic threshold declined substantially between 2010 and 2011, due to the Affordable Care Act provisions that took effect in 2011 to close the coverage gap and provide a 50 percent manufacturer discount for brand drugs, the value of which counts as out-of-pocket spending. Since 2013, however, average out-of-pocket spending among this group has increased due in part to the growing availability and use of high-priced drugs.

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Prescription drugs play an important role in medical care for 59 million seniors and people with disabilities. Medicare beneficiaries have access to outpatient prescription drug coverage through the Part D prescription drug benefit, which is administered by private stand-alone prescription drug plans (PDPs) and Medicare Advantage drug plans (MA-PDs). Since the start of the Medicare Part D program in 2006, the drug benefit has helped to lower out-of-pocket drug spending for all enrollees. Beneficiaries in Part D plans with low incomes and modest assets are eligible for additional assistance with plan premiums and cost sharing through the Low- Income Subsidy (LIS) program, reducing out-of-pocket costs even further for this population.

The Centers for Medicare & Medicaid Services (CMS) establishes guidelines that all Part D plans must follow for the design of the drug benefit and the value of coverage that must be offered. Plans are allowed to vary, however, along dimensions that affect beneficiaries’ access to and costs for medications, including which drugs are covered and cost-sharing requirements. The standard Part D benefit in 2017 includes a deductible ($400), followed by 25 percent coinsurance for prescriptions up to an initial coverage limit ($3,700 in total costs), and then a coverage gap where enrollees without low-income subsidies pay a larger share of their drug costs until their out-of-pocket drug spending exceeds a catastrophic coverage threshold ($4,950). The Affordable Care Act (ACA) included a provision to phase out the Part D coverage gap by requiring plans to cover a growing share of total drug costs and providing a manufacturer price discount of 50 percent for brand-name drugs filled in the gap, with the amount of the manufacturer discount counting towards the out-of-pocket threshold that triggers catastrophic coverage. Once enrollees’ drug spending reaches the catastrophic threshold, those without the LIS pay up to 5 percent of their total drug costs; those who qualify for the full low-income subsidy pay nothing for their drugs in this phase of the benefit. Plans typically place drugs that cost over $670 per month on a specialty drug tier, with coinsurance that ranges from 25 percent to 33 percent.

Concern has been rising in recent years about the growing cost burden on Medicare and beneficiaries posed by new, unique, and expensive specialty drugs used to treat a range of diseases. The Medicare Boards of Trustees and the Medicare Payment Advisory Commission have documented this rising cost burden on the Medicare program, which is reflected in higher Part D program spending overall, as well as higher spending for reinsurance of high-cost Part D enrollees who reach the catastrophic coverage phase of the benefit, where Medicare pays for 80 percent of drug costs. Although Part D provides coverage of catastrophic drug expenses, enrollees who do not receive the LIS are still responsible for up to 5 percent of their drug costs in this phase of the benefit. For very high-priced medications, this relatively small coinsurance rate can translate to a significant amount of out-of-pocket costs for beneficiaries who do not receive low-income subsidies.

This analysis examines the out-of-pocket prescription drug cost burden for Medicare beneficiaries in Part D plans who do not receive low-income subsidies, focusing on those enrollees who have drug costs that exceed the catastrophic coverage threshold. We refer to this group as Part D enrollees with high out-of-pocket drug costs. Although these enrollees do not comprise the entire group of enrollees who have high total drug spending that exceeds the catastrophic coverage threshold, they are exposed to a potentially large cost burden because they do not receive the financial protection of the low-income subsidies. We analyze Medicare prescription drug event claims data for 2015, the most recent year of publicly available Medicare claims data, and trends since 2007, the first full year of the Part D drug benefit. For detail on the data and methods, see the Methodology.

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 In 2015, 3.6 million Medicare Part D Figure 2 enrollees had total drug spending above Nearly 1 in 10 Medicare Part D enrollees had drug spending above the catastrophic coverage threshold in 2015, most of whom received the catastrophic coverage threshold, which low-income subsidies—but 1 million did not equaled $7,062 in total drug costs that Without low-income year. This equals 9 percent of the 41.3 subsidies 1.0 million (2%) million Medicare beneficiaries enrolled in Enrollees with Enrollees with Part D plans in 2015. Of this total, 2.6 spending below the spending above catastrophic the catastrophic million enrollees (72 percent) received coverage threshold coverage threshold With low-income low-income subsidies (LIS) to help pay 37.7 million (91%) subsidies 3.6 million (9%) 2.6 million (6%) their Part D plan premiums and cost sharing, but 1 million enrollees (28 percent) did not receive these additional Total Part D enrollment, 2015: 41.3 million subsidies and were therefore not protected NOTE: Analysis includes Part D enrollees in stand-alone prescription drug plans and Medicare Advantage drug plans. SOURCE: Kaiser Family Foundation analysis of a five percent sample of 2015 Medicare prescription drug event claims from the CMS against having high out-of-pocket drug Chronic Conditions Data Warehouse. costs (Figure 2).  The characteristics of Medicare Part D enrollees with high out-of-pocket drug costs—defined here as enrollees without low-income subsidies who had out-of-pocket drug spending above the catastrophic coverage threshold—are somewhat similar to the overall population of Part D enrollees: predominantly white non-Hispanic, and age 65 and older (Table 1). (Although not a focus of this analysis, the characteristics of Part D enrollees with low-income subsidies who had spending above the catastrophic threshold vary from those of beneficiaries without the LIS.)

Figure 3  On average, Part D enrollees with high out- Medicare Part D enrollees with high out-of-pocket drug costs spent 6 of-pocket drug costs spent $3,041 for times more out of pocket than the average enrollee without low- income subsidies in 2015 prescriptions in 2015 (Figure 3). This is Average out-of-pocket costs for enrollees without low-income subsidies: $3,500 six times more than average out-of-pocket $3,041 $3,000

spending by enrollees without the LIS $2,500

overall ($498) and nearly three times more $2,000

$1,500 than out-of-pocket spending by enrollees $1,123 without the LIS who had spending in the $1,000 $498 coverage gap but not above the $500 $258 $0 catastrophic threshold ($1,123). Enrollees Overall average Enrollees with drug Enrollees with drug Enrollees with spending spending below the spending in the gap but above the catastrophic without the LIS who did not have spending coverage gap below catastrophic threshold threshold NOTE: “High out-of-pocket drug costs” refers to Part D enrollees without low-income subsidies who incurred drug spending above high enough to reach the coverage gap in the catastrophic coverage threshold. Analysis includes enrollees in stand-alone prescription drug plans and Medicare Advantage drug plans. Out-of-pocket costs include Part D drug costs, but not Part D premiums or costs for Part B-covered drugs. SOURCE: Kaiser Family Foundation analysis of a five percent sample of 2015 Medicare prescription drug event claims from the CMS 2015 spent $258 out of pocket. Chronic Conditions Data Warehouse.

No Limit: Medicare Part D Enrollees Exposed to High Out-of-Pocket Drug Costs Without a Hard Cap on Spending 3

 Of their total out-of-pocket costs, Part D Figure 4 enrollees with high out-of-pocket costs Medicare Part D enrollees with high out-of-pocket drug costs incurred 40 percent of their total out-of-pocket costs above the spent $1,826, on average, below the catastrophic coverage threshold in 2015 catastrophic coverage threshold (60 percent) and $1,215 (40 percent) above the catastrophic coverage threshold in 2015 Spending above the $1,215 catastrophic (Figure 4). In the aggregate, Part D 40% Spending coverage below the enrollees with high out-of-pocket costs threshold $1,826 catastrophic spent $1.2 billion on their prescription 60% coverage threshold drug costs above the catastrophic coverage threshold in 2015. Average out-of-pocket spending by high-cost enrollees in 2015 = $3,041  Some Part D enrollees with high out-of- NOTE: “High out-of-pocket drug costs” refers to Part D enrollees without low-income subsidies who incurred drug spending above the catastrophic coverage threshold. Analysis includes enrollees in stand-alone prescription drug plans and Medicare Advantage pocket drug costs spent significantly more drug plans. Out-of-pocket costs include Part D drug costs, but not Part D premiums or costs for Part B-covered drugs. SOURCE: Kaiser Family Foundation analysis of a five percent sample of 2015 Medicare prescription drug event claims from the CMS than the average. One in 10 of these Chronic Conditions Data Warehouse.

beneficiaries spent at least $5,200 out of Figure 5 pocket on their prescription drugs in 2015 One in 10 Part D enrollees with high out-of-pocket drug costs spent at least $5,200 out of pocket on their prescription drugs in 2015 (Figure 5). Out-of-pocket costs for enrollees without low-income subsidies: $10,000 $9,484  Part D enrollees who received low-income $9,000

$8,000 subsidies in 2015 spent significantly less $6,862 $7,000 out of pocket than those without the $6,000 $5,208 subsidies. Those with the LIS who reached $5,000 $4,000 $3,426 $2,924 the catastrophic coverage threshold $3,000 $2,000 (incurring total drug spending above $2,000 $1,000 $7,062 in 2015) spent $113 out of pocket in $- 25th Median 75th 90th 95th 99th 2015, while average out-of-pocket drug Enrollees: percentile percentile percentile percentile percentile Percent 75% 50% 25% 10% 5% 1% spending was $73 among low-income Number 752,025 501,350 250,675 100,270 50,135 10,027 NOTE: “High out-of-pocket drug costs” refers to Part D enrollees without low-income subsidies who incurred drug spending above the catastrophic coverage threshold. Analysis includes enrollees in stand-alone prescription drug plans and Medicare Advantage subsidy enrollees overall (Figure 6). drug plans. Out-of-pocket costs include Part D drug costs, but not Part D premiums or costs for Part B-covered drugs. SOURCE: Kaiser Family Foundation analysis of a five percent sample of 2015 Medicare prescription drug event claims from the CMS  A disproportionate share of aggregate out- Chronic Conditions Data Warehouse. of-pocket drug spending by all Medicare Figure 6 The Low-Income Subsidy program provides significant protection beneficiaries enrolled in Part D is against high out-of-pocket drug costs, especially for Part D enrollees accounted for by enrollees without low- with drug spending above the catastrophic coverage threshold income subsidies who face high out-of- Overall average Enrollees with spending Enrollees with spending $3,500 out-of-pocket spending in the coverage gap above the catastrophic pocket costs (above the catastrophic but not above the threshold $3,041 catastrophic threshold coverage threshold). In 2015, beneficiaries $3,000 in Part D plans spent a total of $15 billion $2,500 $2,000 out of pocket on prescription drugs. Part D $1,500 enrollees with high out-of-pocket drug $1,123 $1,000 costs accounted for 20 percent of $498 $500 aggregate out-of-pocket drug spending by $73 $127 $113 $- all enrollees ($3 billion), even though they Enrollees with low-income subsidies Enrollees without low-income subsidies

NOTE: Analysis includes enrollees in stand-alone prescription drug plans and Medicare Advantage drug plans. Out-of-pocket costs comprised just 2 percent of all Part D include Part D drug costs, but not Part D premiums or costs for Part B-covered drugs. SOURCE: Kaiser Family Foundation analysis of a five percent sample of 2015 Medicare prescription drug event claims from the CMS enrollees (Figure 7). Chronic Conditions Data Warehouse.

No Limit: Medicare Part D Enrollees Exposed to High Out-of-Pocket Drug Costs Without a Hard Cap on Spending 4

Figure 7 Medicare Part D enrollees with high out-of-pocket costs accounted for only 2% of all Part D enrollees in 2015, but their out-of-pocket costs represented 20% of total out-of-pocket spending Enrollees without Enrollees with Enrollees with Enrollees without low-income subsidies low-income subsidies low-income subsidies low-income subsidies spending below spending below spending above spending above catastrophic threshold catastrophic threshold catastrophic threshold catastrophic threshold  The chronic conditions that were most 2% prevalent among stand-alone PDP 6% 20% enrollees with high out-of-pocket drug 26% 2% 1.0 costs in 2015 were similar to the 4% $3.0 million billion enrollees conditions most prevalent among PDP 66% 73% enrollees without low-income subsidies overall, although the prevalence rates were Total Part D enrollment: 41.3 million Total OOP spending: $15.0 billion higher among those with high out-of- NOTE: “High out-of-pocket drug costs” refers to Part D enrollees without low-income subsidies who incurred drug spending above the catastrophic coverage threshold. Analysis includes enrollees in stand-alone prescription drug plans and Medicare Advantage drug plans. Out-of-pocket (OOP) costs include Part D drug costs, but not Part D premiums or costs for Part B-covered drugs. pocket costs. In 2015, the top 3 most SOURCE: Kaiser Family Foundation analysis of a five percent sample of 2015 Medicare prescription drug event claims from the CMS Chronic Conditions Data Warehouse. common chronic conditions among PDP enrollees with high out-of-pocket drug costs (and PDP enrollees overall without the LIS) were hypertension, hyperlipidemia, and diabetes. The prevalence of these conditions among PDP enrollees with high out-of- pocket drug costs was 70 percent, 60 percent, and 48 percent, respectively (Table 2).  PDP enrollees without low-income subsidies who had certain conditions were more likely than others to have high out-of-pocket drug costs in 2015, including 79 percent of those with HIV/AIDS, 35 percent of those with multiple sclerosis, 24 percent of those with viral hepatitis, 11 percent of those with leukemia and lymphoma, and 11 percent of those with schizophrenia (Table 3). For PDP enrollees with other conditions, the share of those with high out-of-pocket drug costs was 10 percent or less.

 Among PDP enrollees with high out-of- Figure 8 pocket drug costs, those with viral In 2015, Part D enrollees in stand-alone PDPs with viral hepatitis who hepatitis incurred the highest average out- had high out-of-pocket drug costs spent more out of pocket on their drugs than those with other conditions—$5,200, on average of-pocket drug spending in 2015 ($5,200), Average out-of-pocket costs for PDP enrollees without low-income subsidies: followed by those with multiple sclerosis Viral hepatitis (n=21,660) $5,200 Multiple sclerosis & transverse myelitis (n=22,320) $4,389 ($4,389), and those with leukemia and Leukemia & lymphoma (n=30,000) $4,269 Liver disease, cirrhosis, & other liver conditions lymphoma ($4,269) (Figure 8). (excluding hepatitis) (n=54,040) $3,651 Cystic fibrosis & other metabolic developmental disorders $3,635  One in 10 PDP enrollees with high out-of- (n=8,460) Cancer (colorectal, endometrial, female/male breast, lung, $3,413 pocket drug costs who had viral hepatitis prostate) (n=95,780) Hip/pelvic fracture (n=5,640) $3,315 or leukemia and lymphoma spent more Migraine & other chronic headache (n=23,020) $3,234 than $8,000 out of pocket on prescription Conduct disorders and hyperkinetic syndrome (n=5,820) $3,164 Fibromyalgia, chronic pain, & chronic fatigue (n=144,900) $3,160 drugs in 2015, while 10 percent of those NOTE: PDP is stand-alone prescription drug plan. “High out-of-pocket drug costs” refers to Part D enrollees without low-income subsidies who incurred drug spending above the catastrophic coverage threshold. Analysis includes enrollees in stand-alone prescription drug plans. Out-of-pocket costs include Part D drug costs, but not Part D premiums or costs for Part B-covered drugs. with liver disease spent more than $7,000, Analysis by chronic conditions excludes Medicare Advantage enrollees. SOURCE: Kaiser Family Foundation analysis of a five percent sample of 2015 Medicare prescription drug event claims from the CMS and 10 percent of those with multiple Chronic Conditions Data Warehouse. sclerosis or cancer spent more than $6,000 out of pocket, on average (Figure 9).

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Figure 9 In 2015, 1 in 10 Part D enrollees in PDPs with viral hepatitis or leukemia/lymphoma who had high out-of-pocket drug costs spent more than $8,000 out of pocket on prescription drugs, on average Out-of-pocket costs for PDP enrollees without low-income subsidies: $10,000 $8,841 $8,180 90th percentile Average 25th percentile $8,000 $7,148  Ten brand-name drugs accounted for more $6,337 $6,273 $5,469 $6,000 $5,261 $5,125 $5,018 $4,933 than 20 percent of the $3 billion in $5,200 $4,389 $4,000 $4,269 $3,651 aggregate out-of-pocket spending by Part $3,413 $3,234 $3,158 $3,315 $3,091 $3,160 $2,000 $2,959 $3,163 D enrollees with high out-of-pocket drug $2,789 $2,625 $2,648 $2,533 $2,455 $2,722 $2,416 $2,367 $- costs in 2015 (Figure 10). One drug alone—Harvoni, a treatment for hepatitis C—accounted for nearly 5 percent of total NOTE: PDP is stand-alone prescription drug plan. “High out-of-pocket drug costs” refers to Part D enrollees without low-income costs among the high-spending population subsidies who incurred drug spending above the catastrophic coverage threshold. Analysis includes enrollees in stand-alone prescription drug plans. Out-of-pocket costs include Part D drug costs, but not Part D premiums or costs for Part B-covered drugs. Analysis by chronic conditions excludes Medicare Advantage enrollees. without the LIS in 2015, while the top SOURCE: Kaiser Family Foundation analysis of a five percent sample of 2015 Medicare prescription drug event claims from the CMS Chronic Conditions Data Warehouse. three drugs—Harvoni, Revlimid (a treatment for multiple sclerosis), and Figure 10 10 brand-name drugs accounted for one-fourth of aggregate out-of- Lantus Solostar (a diabetes drug)— pocket spending by Medicare Part D enrollees with high out-of- accounted for 10 percent. pocket costs in 2015 Drug name: Treatment for: 3.2% 2.6% 1.8% Harvoni Hepatitis C  Sovaldi and Harvoni, breakthrough 4.6% 1.8% 1.7% Revlimid Multiple myeloma Lantus Solostar hepatitis C treatments first available in 1.5% Diabetes 1.5% Spiriva Asthma/COPD 2013 and 2014, respectively, were the two 1.5% Copaxone Multiple sclerosis 1.4% most expensive drugs, in terms of average Lantus Diabetes per capita out-of-pocket spending, for Part Gleevec Leukemia Crestor High cholesterol Advair Diskus D enrollees with high out-of-pocket costs, 78.4% Asthma Zytiga Prostate cancer and those who used one or the other drug All other drugs

also incurred the highest total out-of- Aggregate out-of-pocket spending = $3.0 billion

pocket drug costs in 2015, including their NOTE: “High out-of-pocket drug costs” refers to Part D enrollees without low-income subsidies who incurred drug spending above the catastrophic coverage threshold. Analysis includes enrollees in stand-alone prescription drug plans and Medicare Advantage drug plans. Out-of-pocket costs include Part D drug costs, but not Part D premiums or costs for Part B-covered drugs. out-of-pocket costs for the hepatitis C drug SOURCE: Kaiser Family Foundation analysis of a five percent sample of 2015 Medicare prescription drug event claims from the CMS Chronic Conditions Data Warehouse. plus their out-of-pocket costs for all the other drugs they used in 2015. Figure 11 Harvoni and Sovaldi, treatments for hepatitis C, topped the list of the o For the individual drugs taken by Part D 10 most costly drugs used by Medicare Part D enrollees with high enrollees with high out-of-pocket costs out-of-pocket drug costs in 2015 Average annual out-of-pocket costs per drug for enrollees without low-income subsidies: in 2015, the highest average per capita $7,000 $6,291 out-of-pocket costs were for Harvoni $6,000 $5,392 $4,997 $4,925 $4,805 and Sovaldi, (Figure 11). On average, $5,000 $4,605 $4,377 $4,173 $4,095 $4,094 enrollees who faced high out-of-pocket $4,000 $3,000 drug costs in 2015 spent $6,291 for $2,000

Harvoni and $5,392 for Sovaldi. $1,000

Rounding out the top five were three $0 Drug: Harvoni Sovaldi Jakafi Gleevec Tasigna Revlimid Tracleer Imbruvica Copaxone Letairis Treats: Hepatitis C Hepatitis C Myelo- Leukemia Leukemia Multiple Pulmonary Leukemia Multiple Pulmonary drugs to treat different types of cancer: fibrosis myeloma arterial sclerosis arterial hypertension hypertension NOTE: “High out-of-pocket drug costs” refers to Part D enrollees without low-income subsidies who incurred drug spending above Jakavi ($4,997), Gleevec ($4,925), and the catastrophic coverage threshold. Analysis includes enrollees in stand-alone prescription drug plans and Medicare Advantage drug plans. Out-of-pocket costs include Part D drug costs, but not Part D premiums or costs for Part B-covered drugs. Analysis Tasigna ($4,805). limited to drugs with 100 (2,000 weighted) or more users in 2015. SOURCE: Kaiser Family Foundation analysis of a five percent sample of 2015 Medicare prescription drug event claims from the CMS Chronic Conditions Data Warehouse.

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o Including their out-of-pocket costs for Figure 12 all of the drugs they used in 2015, Part D In 2015, Part D enrollees with high out-of-pocket drug costs who enrollees with high out-of-pocket costs used Harvoni and Sovaldi spent more than $6,700, on average, factoring in costs for the other drugs they used who used Harvoni spent a total of Average annual out-of-pocket costs for enrollees without low-income subsidies: All other drugs used $8,000 High-cost drug $6,736 out of pocket, on average, $6,736 $7,000 $6,722 $445 $5,663 $5,573 including $6,291 for Harvoni alone plus $6,000 $1,330 $5,456 $5,390 $5,295 $5,290 $5,185 $858 $576 $4,811 $5,000 $1,079 $465 $581 an additional $445 on other drugs they $1,610 $1,196 $4,000 $1,263 used in 2015 (Figure 12). Those who $3,000 $6,291 $5,392 $4,997 $4,805 $4,377 $4,925 $4,605 used Sovaldi spent a total of $6,722 on $2,000 $3,685 $4,094 $3,548 average, including $5,392 for Sovaldi $1,000 $0 plus $1,330 for other drugs they used. Drug: Harvoni Sovaldi Tasigna Jakafi Tracleer Gleevec Pomalyst Letairis Revlimid Sprycel Treats: Hepatitis C Hepatitis C Leukemia Myelo- Pulmonary Leukemia Multiple Pulmonary Multiple Leukemia fibrosis arterial myeloma arterial sclerosis hypertension hypertension NOTE: “High out-of-pocket drug costs” refers to Part D enrollees without low-income subsidies who incurred drug spending above the catastrophic coverage threshold. Analysis includes enrollees in stand-alone prescription drug plans and Medicare Advantage drug plans. Out-of-pocket costs include Part D drug costs, but not Part D premiums or costs for Part B-covered drugs. Analysis limited to drugs with 100 (2,000 weighted) or more users in 2015. SOURCE: Kaiser Family Foundation analysis of a five percent sample of 2015 Medicare prescription drug event claims from the CMS Chronic Conditions Data Warehouse.

Figure 13  The number of Part D enrollees who face The number of Medicare Part D enrollees without low-income subsidies who had drug spending above the catastrophic coverage high out-of-pocket drug costs more than threshold more than doubled between 2007 and 2015 doubled between 2007 and 2015, from 0.4 Enrollees without low-income subsidies and spending above the catastrophic threshold million to 1.0 million; their share of all 3.6 Enrollees with low-income subsidies and 3.4 non-LIS enrollees increased somewhat spending above the catastrophic threshold 2.8 1.0 0.9 from 2.7 percent in 2007 (0.4 million out 2.6 2.6 2.4 2.3 2.4 2.4 0.7 of 15.3 million) to 3.6 percent in 2015 (1.0 0.5 0.5 0.4 0.4 0.4 0.4 million out of 28.1 million) (Figure 13). 2.5 2.6 This increase is due in part to the ACA 2.2 2.1 1.9 2.0 2.0 2.0 2.1 coverage gap changes that took effect in 2011, including counting the value of the 2007 2008 2009 2010 2011 2012 2013 2014 2015 manufacturer discount as out-of-pocket NOTE: Analysis includes enrollees in stand-alone prescription drug plans and Medicare Advantage drug plans. Numbers may not sum to totals due to rounding. SOURCE: Kaiser Family Foundation analysis of a five percent sample of 2007-2015 Medicare prescription drug event claims from spending, as well as to the increased the CMS Chronic Conditions Data Warehouse. availability and use of higher-priced drugs. Figure 14  The share of Part D enrollees with high In 2015, 6 in 10 Medicare Part D enrollees with high out-of-pocket out-of-pocket drug costs who used drug costs used expensive drugs—those costing $600 or more per month; this share has more than doubled since 2007 expensive drugs—those costing $600 or Percent of enrollees without low-income subsidies using expensive drugs: more per month—more than doubled 70% 60% between 2007 and 2015, from 23 percent 60% 55% 55% to 60 percent (Figure 14). 50% 46% 37% 40% 35%  The trend of greater use of more expensive 32% 30% 27% drugs is reflected in an increase in the 23% 20% average total cost per prescription for Part 10% D enrollees with high out-of-pocket drug 0% costs, which increased from $99 per 2007 2008 2009 2010 2011 2012 2013 2014 2015 NOTE: “High out-of-pocket drug costs” refers to Part D enrollees without low-income subsidies who incurred drug spending above the catastrophic coverage threshold. Analysis includes enrollees in stand-alone prescription drug plans and Medicare Advantage prescription in 2007 to $277 in 2015 drug plans. Out-of-pocket costs include Part D drug costs, but not Part D premiums or costs for Part B-covered drugs. SOURCE: Kaiser Family Foundation analysis of a five percent sample of 2007-2015 Medicare prescription drug event claims from the CMS Chronic Conditions Data Warehouse.

No Limit: Medicare Part D Enrollees Exposed to High Out-of-Pocket Drug Costs Without a Hard Cap on Spending 7

(Figure 15). Between 2007 and 2015, the Figure 15 average annual per capita number of Among Medicare Part D enrollees with high out-of-pocket drug costs, prescriptions filled by this group decreased the average number of prescriptions used has dropped slightly while the average cost of each prescription has increased over time slightly from 103 to 99. Spending per prescription Number of prescriptions $300 120 103 103 102 103  With the ACA provisions to phase out the 102 101 101 100 99 $250 100 coverage gap taking effect in 2011, average out-of-pocket spending by Part D enrollees $200 80

$150 60 who incur high out-of-pocket costs is lower $277 $234 in 2015 than it was in 2010, before the gap $100 $205 40 $179 $149 coverage phase-out began (Figure 16). $126 $141 $50 $99 $110 20 The first-year effect of the ACA changes $0 0 was a substantial reduction in spending by 2007 2008 2009 2010 2011 2012 2013 2014 2015 NOTE: “High out-of-pocket drug costs” refers to Part D enrollees without low-income subsidies who incurred drug spending above the catastrophic coverage threshold. Analysis includes enrollees in stand-alone prescription drug plans and Medicare Advantage Part D enrollees who incurred high out-of- drug plans. Out-of-pocket costs include Part D drug costs, but not Part D premiums or costs for Part B-covered drugs. SOURCE: Kaiser Family Foundation analysis of a five percent sample of 2007-2015 Medicare prescription drug event claims from pocket drug costs, after increasing every the CMS Chronic Conditions Data Warehouse.

year between 2007 and 2010. But this Figure 16 trend has reversed in recent years. Average out-of-pocket spending by Medicare Part D enrollees with high-out-of-pocket costs dropped substantially in 2011, due to the o Between 2007 and 2010, average Affordable Care Act provision to phase out the coverage gap by 2020 spending by Part D enrollees with high Average annual out-of-pocket costs for enrollees without low-income subsidies: $5,000 $4,465 out-of-pocket drug costs increased each $4,500 $4,367 Phase-out of $4,055 $3,854 coverage year, in keeping with the annual $4,000 gap begins $3,500 $3,004 $3,058 $3,041 increases in the out-of-pocket threshold $3,000 $2,789 $2,870 that triggered catastrophic coverage. $2,500 $2,000 Enrollees who incurred high out-of- $1,500 pocket costs spent 16 percent more out $1,000 of pocket, on average, in 2010 ($4,465) $500 $0 than in 2007 ($3,854). But between 2007 2008 2009 2010 2011 2012 2013 2014 2015 NOTE: “High out-of-pocket drug costs” refers to Part D enrollees without low-income subsidies who incurred drug spending above the catastrophic coverage threshold. Analysis includes enrollees in stand-alone prescription drug plans and Medicare Advantage 2010 and 2011, the average declined 33 drug plans. Out-of-pocket costs include Part D drug costs, but not Part D premiums or costs for Part B-covered drugs. SOURCE: Kaiser Family Foundation analysis of a five percent sample of 2007-2015 Medicare prescription drug event claims from percent to $3,004 as the ACA coverage the CMS Chronic Conditions Data Warehouse.

gap phase-out began. Figure 17 o Between 2013 and 2015, average out-of- Over time, Medicare Part D enrollees with high out-of-pocket drug costs have spent more of their out-of-pocket costs in the pocket spending by Part D enrollees with catastrophic coverage phase, from 13% in 2007 to 40% in 2015 high out-of-pocket drug costs increased Average annual out-of-pocket costs for enrollees without low-income subsidies: Above catastrophic $5,000 coverage threshold by 9 percent, from $2,789 to $3,041, in $4,367 $4,465 Phase-out of $4,500 $4,055 Below catastrophic $3,854 17% 19% coverage coverage threshold conjunction with the introduction of new $4,000 15% $727 $832 gap begins 13% $595 $3,500 $501 $3,058 $3,041 high-costs drugs, including $3,004 $2,870 $3,000 $2,789 22% 26% breakthrough treatments for hepatitis C. $2,500 $663 $805 30% 35% 40% $832 $995 $1,215 $2,000 85% 83% 81% 87% $3,639 $3,633  Over time, the share of out-of-pocket $1,500 $3,353 $3,460 78% 74% $1,000 $2,341 $2,252 70% 65% 60% spending in the catastrophic coverage $1,956 $1,875 $1,826 $500

phase among Part D enrollees facing high $0 out-of-pocket costs has increased: it was 13 2007 2008 2009 2010 2011 2012 2013 2014 2015 NOTE: “High out-of-pocket drug costs” refers to Part D enrollees without low-income subsidies who incurred drug spending above the catastrophic coverage threshold. Analysis includes enrollees in stand-alone prescription drug plans and Medicare Advantage percent in 2007, 30 percent in 2013, and drug plans. Out-of-pocket costs include Part D drug costs, but not Part D premiums or costs for Part B-covered drugs. SOURCE: Kaiser Family Foundation analysis of a five percent sample of 2007-2015 Medicare prescription drug event claims from 40 percent in 2015 (Figure 17). the CMS Chronic Conditions Data Warehouse.

No Limit: Medicare Part D Enrollees Exposed to High Out-of-Pocket Drug Costs Without a Hard Cap on Spending 8

In recent years, the high and rising cost of prescription drugs has emerged as a pressing issue for consumers, public programs, and private insurers. As our analysis shows, Medicare beneficiaries who do not receive the additional financial protection provided by low-income subsidies are not insulated from this cost burden and can incur substantial out-of-pocket costs for their medications. We find that one million Medicare beneficiaries in Part D plans who were not receiving low-income subsidies had high out-of-pocket costs in 2015—that is, drug spending above the catastrophic coverage threshold—and their annual out-of-pocket spending averaged over $3,000 in 2015.

Our analysis indicates that out-of-pocket costs above the catastrophic threshold represent a growing concern for people with Medicare, and both MedPAC and Medicare’s actuaries have shown that rising spending for catastrophic coverage has placed greater fiscal pressure on Medicare. Our analysis also shows that the number of Part D enrollees who did not receive low-income subsidies and had out-of-pocket spending above the catastrophic threshold has increased over time. Looking to the future, we would expect to see continued increases in the number of enrollees reaching the catastrophic coverage threshold in 2016 and later years, due in part to the ACA changes to the coverage gap as well as the greater availability and use of high-priced drugs. These trends have cost implications both for beneficiaries and, as the Medicare actuaries have projected, for Medicare.

Part D enrollees with high out-of-pocket costs in 2015 spent an average of $1,215 out of pocket on their prescriptions filled above the catastrophic threshold, or $1.2 billion in the aggregate. In other words, Part D enrollees would have collectively saved $1.2 billion if Part D had a hard cap on out-of-pocket spending, rather than requiring enrollees to pay up to 5 percent coinsurance in the catastrophic coverage phase. Placing a hard cap on out-of-pocket spending under Part D would save money for enrollees, but would increase costs to Medicare and would not address underlying concerns related to high-priced drugs.

While Part D has helped make drugs more affordable for people with Medicare, and the ACA has provided additional relief to enrollees with high drug costs by gradually closing the coverage gap, the absence of an annual out-of-pocket spending limit under Part D exposes enrollees to significant costs—unless their incomes and assets are low enough to qualify for low-income subsidies. Various proposals to reduce drug costs— including allowing the federal government to negotiate prices for Medicare beneficiaries, and allowing Americans to import drugs from Canada and other countries—enjoy broad, bipartisan public support. With a growing number of people on Medicare facing high out-of-pocket drug costs, alleviating this burden remains an issue for federal policymakers to address.

Juliette Cubanski, Tricia Neuman, and Kendal Orgera are with the Kaiser Family Foundation. Anthony Damico is an independent consultant. This work was funded in part by the Retirement Research Foundation.

No Limit: Medicare Part D Enrollees Exposed to High Out-of-Pocket Drug Costs Without a Hard Cap on Spending 9

Enrollees with spending above the catastrophic coverage threshold All Part D enrollees Enrollees with the Enrollees without Total low-income the low-income subsidy subsidy

Percent Percent Percent Percent Number Number Number Number of total of total of total of total

Gender Female 23,652,440 57% 2,109,320 58% 1,596,300 61% 513,020 51% Male 17,626,140 43% 1,510,320 42% 1,020,640 39% 489,680 49% Age <65 7,090,980 17% 1,463,680 40% 1,331,620 51% 132,060 13% 65-69 10,162,920 25% 606,880 17% 365,340 14% 241,540 24% 70-74 8,461,240 20% 545,880 15% 304,440 12% 241,440 24% 75-79 6,192,700 15% 415,120 11% 242,460 9% 172,660 17% 80-84 4,393,760 11% 295,000 8% 181,040 7% 113,960 11% 85+ 4,976,980 12% 293,080 8% 192,040 7% 101,040 10% Race/ethnicity White non-Hispanic 30,932,840 75% 2,450,240 68% 1,581,740 60% 868,500 87% Black non-Hispanic 4,593,300 11% 558,440 15% 495,860 19% 62,580 6% Hispanic 3,463,640 8% 385,820 11% 353,040 13% 32,780 3% Asian/Pacific 1,362,340 3% 146,840 4% 131,380 5% 15,460 2% Islander

Other/unknown 926,460 2% 78,300 2% 54,920 2% 23,380 2%

Residence Nursing home/ facility resident 2,567,880 6% 578,420 16% 516,940 20% 61,480 6% Non-facility 38,710,700 94% 3,041,220 84% 2,100,000 80% 941,220 94% resident NOTE: Analysis includes enrollees in stand-alone prescription drug plans and Medicare Advantage drug plans. Out-of-pocket costs include Part D drug costs, but not Part D premiums or costs for Part B-covered drugs. Numbers may not sum to totals due to rounding. SOURCE: Kaiser Family Foundation analysis of a five percent sample of 2015 Medicare prescription drug event claims from the CMS Chronic Conditions Data Warehouse.

No Limit: Medicare Part D Enrollees Exposed to High Out-of-Pocket Drug Costs Without a Hard Cap on Spending 10

All Medicare Part D enrollees in PDPs Part D enrollees in PDPs with high out-of-pocket drug

without the low-income costs subsidy

Among PDP Among PDP enrollees with enrollees with Average Percent high out-of- this disease, % out-of- Number Number of total pocket drug with high out- pocket costs, % with of-pocket spending this disease drug costs

Hypertension 9,163,440 54.8% 498,120 70.3% 5.4% $2,991 Hyperlipidemia 7,900,800 47.3% 428,660 60.5% 5.4% $2,925 Diabetes 4,014,700 24.0% 341,700 48.2% 8.5% $2,827 Ischemic heart disease 4,364,120 26.1% 298,080 42.1% 6.8% $2,940 Rheumatoid 4,979,740 29.8% 286,580 40.4% 5.8% $3,017 arthritis/osteoarthritis Anemia 3,281,360 19.6% 255,800 36.1% 7.8% $3,158 Chronic kidney disease 2,714,380 16.2% 244,500 34.5% 9.0% $2,989 Alzheimer's disease, related disorders, or senile 3,012,980 18.0% 216,480 30.5% 7.2% $3,067 dementia & depression Heart failure 1,963,400 11.7% 171,220 24.2% 8.7% $2,971 Depression 2,218,100 13.3% 168,500 23.8% 7.6% $3,127 Depressive disorders 2,077,900 12.4% 164,900 23.3% 7.9% $3,116 Acquired hypothyroidism 2,540,920 15.2% 156,580 22.1% 6.2% $3,036 Obesity 1,742,780 10.4% 152,580 21.5% 8.8% $2,849 Fibromyalgia, chronic pain & 1,727,700 10.3% 144,900 20.4% 8.4% $3,160 chronic fatigue Chronic obstructive pulmonary disease & 1,560,860 9.3% 144,400 20.4% 9.3% $2,935 bronchiectasis Cataract 3,305,420 19.8% 143,140 20.2% 4.3% $3,100 Peripheral vascular disease 1,647,880 9.9% 130,080 18.4% 7.9% $2,887 Anxiety disorders 1,831,880 11.0% 127,540 18.0% 7.0% $3,108 Asthma 1,139,820 6.8% 115,140 16.2% 10.1% $2,933 Cancer: Colorectal; endometrial; female or 1,485,380 8.9% 95,780 13.5% 6.4% $3,413 male breast; lung; prostate NOTE: PDP is stand-alone prescription drug plan. Analysis by chronic conditions excludes Medicare Advantage enrollees. Analysis includes the top 20 conditions among those chronic conditions included in the Chronic Conditions and Other Chronic or Potentially Disabling Conditions segments of the Medicare Master Beneficiary Summary file. “High out-of-pocket drug costs” refers to Part D enrollees without low-income subsidies who incurred drug spending above the catastrophic coverage threshold. Analysis includes enrollees in stand-alone prescription drug plans. Out-of-pocket costs include Part D drug costs, but not Part D premiums or costs for Part B-covered drugs. Numbers may not sum to totals due to rounding. SOURCE: Kaiser Family Foundation analysis of a five percent sample of 2015 Medicare prescription drug event claims from the CMS Chronic Conditions Data Warehouse.

No Limit: Medicare Part D Enrollees Exposed to High Out-of-Pocket Drug Costs Without a Hard Cap on Spending 11

All Medicare Part D enrollees in PDPs Part D enrollees in PDPs with high out-of-pocket drug

without the low- costs income subsidy

HIV/AIDS 20,580 0.1% 16,240 2.3% 78.9% $2,354 Multiple sclerosis & 64,480 0.4% 22,320 3.1% 34.6% $4,389 transverse myelitis Viral hepatitis 90,620 0.5% 21,660 3.1% 23.9% $5,200 Leukemia & lymphoma 269,440 1.6% 30,000 4.2% 11.1% $4,269 Schizophrenia 55,980 0.3% 5,980 0.8% 10.7% $2,827 Liver disease, cirrhosis, & other liver conditions 516,100 3.1% 54,040 7.6% 10.5% $3,651 (excluding hepatitis) Pressure ulcers & chronic 596,680 3.6% 61,400 8.7% 10.3% $2,991 ulcer Asthma 1,139,820 6.8% 115,140 16.2% 10.1% $2,933 Cystic fibrosis & other metabolic developmental 88,980 0.5% 8,460 1.2% 9.5% $3,635 disorders Bipolar disorder 248,740 1.5% 23,480 3.3% 9.4% $3,020 Epilepsy 219,560 1.3% 20,480 2.9% 9.3% $3,152 Traumatic brain injury & nonpsychotic mental 51,080 0.3% 4,760 0.7% 9.3% $3,125 disorders due to brain damage Chronic obstructive pulmonary disease & 1,560,860 9.3% 144,400 20.4% 9.3% $2,935 bronchiectasis Conduct disorders & 63,620 0.4% 5,820 0.8% 9.1% $3,164 hyperkinetic syndrome Chronic kidney disease 2,714,380 16.2% 244,500 34.5% 9.0% $2,989 Schizophrenia & other 277,880 1.7% 24,440 3.4% 8.8% $3,078 psychotic disorders Obesity 1,742,780 10.4% 152,580 21.5% 8.8% $2,849 Heart failure 1,963,400 11.7% 171,220 24.2% 8.7% $2,971 Spinal cord injury 43,920 0.3% 3,820 0.5% 8.7% $3,134 Personality disorders 58,620 0.4% 5,000 0.7% 8.5% $3,088 NOTE: PDP is stand-alone prescription drug plan. Analysis by chronic conditions excludes Medicare Advantage enrollees. Analysis includes the top 20 conditions among those chronic conditions included in the Chronic Conditions and Other Chronic or Potentially Disabling Conditions segments of the Medicare Master Beneficiary Summary file. “High out-of-pocket drug costs” refers to Part D enrollees without low-income subsidies who incurred drug spending above the catastrophic coverage threshold. Analysis includes enrollees in stand-alone prescription drug plans. Out-of-pocket costs include Part D drug costs, but not Part D premiums or costs for Part B-covered drugs. Numbers may not sum to totals due to rounding. SOURCE: Kaiser Family Foundation analysis of a five percent sample of 2015 Medicare prescription drug event claims from the CMS Chronic Conditions Data Warehouse.

No Limit: Medicare Part D Enrollees Exposed to High Out-of-Pocket Drug Costs Without a Hard Cap on Spending 12

This analysis uses data from a five percent sample of Medicare Part D prescription drug event (PDE) claims from the Centers for Medicare & Medicaid Services (CMS) Chronic Conditions Data Warehouse (CCW) for Part D enrollees between 2007 and 2015. The PDE claims data includes all prescription drug events reported by Part D plans for their enrollees in a given calendar year, and includes detailed data on spending for each event, corresponding to a single prescription drug fill, including how much was paid by plans, low-income subsidy amounts, and beneficiary out-of-pocket payments. The claims data includes spending for Part D covered drugs, but does not include spending on Part D plan premiums, Part B covered drugs (which are typically administered in providers’ offices or hospital outpatient settings), or the cost of drugs purchased outside the Part D plan. The CCW data also includes a limited number of demographic variables (gender, age, race/ethnicity) and flags for several chronic conditions (27 common chronic conditions and 35 other chronic or potentially disabling conditions).

We calculated average out-of-pocket spending and percentiles for enrollees overall and by three benefit phases: enrollees with total drug spending below the coverage gap, those with spending in the coverage gap but not above the catastrophic coverage threshold, and those with spending above the catastrophic coverage threshold. Our analysis focuses on beneficiaries enrolled in both stand-alone prescription drug plans (PDPs) and Medicare Advantage prescription drug plans who have high out-of-pocket drug costs, which we define as enrollees who have drug spending that exceeds the catastrophic coverage threshold in a given year who do not receive low-income subsidies (LIS). The catastrophic threshold is updated annually by the annual percentage increase in average expenditures for Part D drugs per eligible beneficiary; in 2015, the threshold amount was $7,062. The 2015 PDE sample includes 2.1 million Part D enrollees (41.3 million weighted), of whom 180,982 (3.6 million weighted) had spending above the catastrophic coverage threshold, including 50,135 (1.0 million weighted) who had high out-of-pocket drug costs and did not receive the LIS. Our analysis of spending by chronic condition includes only those Part D enrollees in stand-alone PDPs because the CCW variables that identify chronic conditions are derived from information in medical claims, which are not reported by Medicare Advantage plans for their enrollees.

Our analysis of specific drugs associated with high out-of-pocket spending was limited to drugs with 100 (2,000 weighted) or more users in 2015 to avoid reporting estimates based on small sample size. There are a small number of drugs that had higher average out-of-pocket costs among Part D enrollees with high out-of- pocket spending than the top drug we report (Harvoni), but the number of users of each of those drugs in the CCW PDE for 2015 was less than 100. Because we cannot report data for these drugs, our analysis of the most expensive drugs among those with high out-of-pocket costs is conservative to the extent that it does not include those drugs with higher out-of-pocket costs but smaller (unreliable) sample sizes. For example, based on the publicly-available CMS 2015 Medicare drug spending data, the drug with the highest out-of-pocket costs among non-LIS enrollees was Cinryze, a C1 esterase inhibitor, with 104 non-LIS users and average out-of- pocket spending of $24,274 in 2015, followed by Berinert, also a C1 esterase inhibitor, with 43 non-LIS users and average out-of-pocket costs of $14,258.

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